This invention relates to methods and systems for leasing equipment, and particularly to the management of lease cancellations.
For leasing companies with large volumes of leased items, management of the leasing process must be performed with the assistance of a computer because the leasing process involves a large volume of information pertaining to inventory, items which are leased, the varying terms of each lease contract, periodic payments due and received, billing, and calculation of the appropriate lease payment to achieve a targeted profitability. One area of the management of large numbers of leases to which automation has not been achieved to date is the resolution of early returns of leased items. By early returns, we mean situations where the lessee returns the leased item to the lessor prior to the normal termination of the lease contract, and the lessor needs to determine the amount to be collected from the lessee. Normally the lessee wishes to pay nothing for the remaining period of the lease since the item is not being used, even though the lease contract specifies a formula for calculating the amount due upon early termination. In the industry, the amount due in such situations according to the contract formula is frequently merely the starting point of a negotiation.
Negotiation of the penalty for early returns is a fact of life in the leasing industry. Since the lessor""s agent who is authorized to negotiate the penalty for the early return usually does not have access to the complex data and formulas involved in determining the real cost to the lessor due to an early return, the lessor is at a disadvantage in such negotiations. Many of the early return situations are resolved without the knowledge of the actual reduction in profit to the lessor due to the early return.
There has therefore been a need to provide an automated method for calculating the real loss, or projected loss, due to the early return, and to make that information readily available to the lessor""s personnel authorized to negotiate with the lessee regarding the amount of compensation, i.e., xe2x80x9cpenalty,xe2x80x9d to be paid for the early return.
Furthermore, for high volume leasing companies, process quality improvements can result in higher levels of profitability. There is a need in the area of early returns to develop measurement methods so that weaknesses in the process can be identified and improved or corrected.
This need, and others which will become apparent from the following disclosure and drawings, is addressed by the present invention which in one aspect comprises a computer assisted method for managing the cancellation of equipment lease contracts on a date prior to the date set forth in the contract comprising creating a database of lease contracts comprising a plurality of account entries, each account entry including lease contract information comprising the name of the lessor (Nl), the normal contract lease termination date (Dt), the amount (Pa) and remaining number (Pn) of periodic payments, the remaining time on the contract at termination (Rt), the identity (Ei) and class (Ec) of equipment which is the subject matter of the lease contract; calculating the number of items of the class of equipment presently in inventory, the number of items of the class which are presently leased, the historical utilization rate of the class (Hu), the historical lease rate (Hlr), and the historical time to lease items of the class following return of item of the class to inventory after a previous lease is terminated (Ht); inputting data upon termination of a lease comprising the identity (Ei) of the leased item and the reason code for the termination of the lease (Rc); calculating the sum of the remaining periodic payments (Rp) according to the lease contract wherein Rp=Pa*Pn, (or Rp=Pa*Rt if Pa is defined as the payment rate in dollars per month), calculating a breakeven amount (Bv) according to a formula as follows: Bv={Rpxe2x88x92[(Rtxe2x88x92Ht)*Hlr]*Hu}; and billing the lessee a termination fee (Ft) no higher than Rp and no lower than Bv.
In another aspect, the invention comprises a system for managing the cancellation of equipment lease contracts on a date prior to the date set forth in the contract comprising a database of lease contracts comprising a plurality of account entries, each account entry including lease contract information comprising the name of the lessor, the normal contract lease termination date (Dt), the amount (Pa) and remaining number (Pn) of periodic payments, the remaining time on the contract at termination (Rt), the identity (Ei) and class (Ec) of equipment which is the subject matter of the lease contract; a database of all classes of equipment (Ec) owned by the lessor, each entry comprising the identity of the class of equipment, the number of items of the class of equipment presently in inventory, the number of items of the class which are presently leased, the historical utilization rate of the class (Hu), the historical lease rate (Hlr), a discount rate to compensate for lease rate to rental rate conversion (Dr), and the historical time to lease items of the class following return of item of the class to inventory after a previous lease is terminated (Ht); a client workstation for inputting data upon termination of a lease comprising the identity (Ei) of the leased item and the reason for the termination of the lease (Rt); a processor for calculating the value of the remaining periodic payments according to the lease contract (Rv), a breakeven amount (Bv) wherein Bv={Rvxe2x88x92[(Rtxe2x88x92Ht)*Hlr*Hu}; and for selecting a termination fee (Ft) ranging from Rv to Bv.